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Until a few years ago, Intel Inc., like all U.S. companies trying to protect their brands internationally, typically had to register its trademarks country-by-country — a cumbersome and expensive process. But in November 2003 the United States acceded to the Madrid Protocol, a multinational registration system that enables companies to register trademarks in multiple countries simultaneously through the company’s home trademark office. The talk in U.S. trademark circles was that one-stop-shopping would revolutionize international registrations, simplifying the process and lowering costs. “It’s a New World in Trademarks,” read the headline of one of a number of articles published around the time of the U.S. accession. But more than a year later, Santa Clara, Calif.-based Intel still registers most of its marks the old-fashioned way. “We’ve used the Madrid Protocol on occasion, but for the most part we still use national registrations,” says Anne Gundelfinger, Intel’s associate general counsel-corporate marketing, trademarks and brands, who oversees the more than 7,000 applications and registrations Intel has worldwide. Intel is not alone. As of May 31, only 2,861 Madrid Protocol registration applications had been filed by U.S.-based companies since the treaty went into effect, according to the World Intellectual Property Organization, which administers the treaty. In contrast, during the same period, foreign companies filed a total of 15,530 applications seeking registration in the United States under the agreement. “The change for U.S. companies has hardly been revolutionary,” says David Davis, a partner and intellectual property attorney at Baker & McKenzie in Chicago. The Madrid system has been around in some form since 1891. (The protocol is governed by two international treaties, both of which were signed in Madrid.) It was only in 1993, however, that the U.S. Congress introduced the Madrid Protocol Implementation Act. After a decade of wrangling, the legislation finally took effect in November 2003. U.S. companies have been reluctant to use the protocol, in large part because of the countries that haven’t signed on. While 77 nations, including the United Kingdom, Japan, Germany and China, have acceded to the protocol, much of the world has not. No Latin American country has joined, except Cuba — a country with which U.S. companies cannot legally trade. And neither one of the United States’ two largest trading partners — Canada and Mexico — belongs. U.S. companies must continue to register their marks separately in those countries. “It comes down to cost savings,” says Janet Satterthwaite, a partner at Venable who specializes in trademark law. “If it’s a major international filing, the Madrid system could save a company a tremendous amount of money, but if it’s going to be useful in only a few countries, it may not be worth it.” Certain treaty rules are also holding U.S. companies back. The protocol only allows companies that are based in a signatory country to hold international registrations. So if a U.S. company registers marks through the Madrid Protocol, and then decides for tax purposes to move offshore to the Virgin Islands (a nonmember), its international trademarks would become invalid. The same thing would occur if the U.S. company were acquired by a corporation based in a nonprotocol country. “The company would then have to reregister everything,” Davis says. Alternatively, the company would have to create a separate IP holding company in the United States. Another major deterrent: The U.S. Patent and Trademark Office. The PTO generally has more stringent registration requirements than its counterparts in other countries, especially when defining the goods and services a trademark represents. Since a company using the Madrid Protocol must file a trademark application in its home country, a U.S. company seeking an international registration under Madrid would have to provide a narrow definition of goods and services, putting it at a disadvantage overseas. Individual registrations could garner a much broader definition of goods and services, and gain broader protection. “For a company like Intel, that matters a great deal,” says Gundelfinger, who is also the current president of the International Trademark Association. “If you own well-known marks, it’s difficult to get a broad scope of protection unless you can specify a broad scope of goods in any class.” Intel has registered a few trademarks using the Madrid Protocol, but these were second-tier marks in which the broad scope of the mark wasn’t as important, Gundelfinger says. The Madrid Protocol is not the first agreement that allows U.S. companies to register trademarks in several places simultaneously. Even before acceding to the Madrid system, companies in the United States had the option of applying for the European Union’s Community Trade Mark, which allows companies to protect a trademark in all 25 EU countries through a single application. Under that system, U.S. applicants do not need to go through the U.S. patent office. Since October 2004, companies have been able to designate a community mark on a Madrid application in the same way one might designate other member countries. In time, that may encourage more use of the protocol, but many U.S. companies still opt for the Community Trade Mark over the Madrid system. “The CTM gives us broad protection across Europe without limiting the scope of goods protected,” says Gundelfinger. Even foreign companies that usually use the Madrid Protocol have shied away from using it to register marks in the United States, because of the requirement to narrowly specify goods and services. Since trademark applications are examined on a country-by-country basis in the Madrid system, a broadly written trademark may be approved in many countries, but rejected in the United States. Typically, foreign companies wind up hiring U.S. lawyers to help them narrow their definitions and proceed through the registration process. “There are no cost savings in the U.S. under the Madrid system,” says Gerhard Bauer, chief trademark counsel for DaimlerChrysler AG in Germany. “We’ve been using the Madrid system since the 1920s and use it wherever possible — but we don’t use it in the U.S.” DaimlerChrysler, which has about 36,000 trademark registrations and applications worldwide, files about 100 applications a year in the United States, Bauer says, but opts for a national application over the international one. Bauer usually uses New York-based von Maltitz, Derenberg, Kunin, Janssen & Giordano to file in the United States. Even when membership and scope are not issues, U.S. companies may be deterred from using the Madrid Protocol because of its “central attack” rule. That rule, a core part of the agreement, says that if the basic home-country application is refused, successfully opposed, withdrawn, or canceled within the first five years of the filing date, registrations must also be canceled in all the covered countries. “If your home registration is canceled, it’s a house of cards,” says Christopher Kelly, a partner who specializes in trademark law at Wiley Rein & Fielding in Washington, D.C. “The entire registration falls down.” The agreement does give companies a safety net if their basic application is canceled. Within three months of cancellation, they have the right to transform an international registration into a series of national applications, and still retain the date of the original registration. But this would involve quickly filing national applications in each individual country, paying new filing fees, and retaining attorneys in each country. “In other words, you’d once again encounter an expensive and unwieldy process, and your cost savings would disappear,” Davis says. No one is ready to write off the Madrid Protocol. “For small and medium-sized companies with tight budgets that don’t need a broad scope of protection, it’s a great thing,” says Gundelfinger. And as more countries accede to the treaty — and several are discussing it — the Madrid system will look more attractive to U.S. companies. “When Canada and Mexico become members, it will become more appealing,” says Davis. Since Madrid registrations have a 10-year lifespan, U.S. companies have yet to see how much they could save when renewing a trademark. It is at this stage where most savings occur, says Bauer: Under the Madrid system a company pays one renewal fee instead of fees to each country. “The cost of renewals on a country-by-country basis can blow your mind,” says Gundelfinger, noting that even a company with a portfolio somewhat smaller than Intel’s can spend $1 million in renewal fees. “Ultimately, deciding whether to use the Madrid system comes down to weighing costs and benefits,” says Baker & McKenzie’s Niebel. “You have to pick up a calculator and see how much you can save. And then you have to balance the financial benefits with the legal advantages and disadvantages.” Satterthwaite and her Venable colleague Andrew Price, a trademark attorney who has tracked U.S. usage of the Madrid system, believe that U.S. companies have been slow to embrace the Madrid Protocol in part because of its complexities. But they think this is gradually changing. “The Madrid Protocol is the most underutilized tool in the arsenal of trademark practitioners,” Price says. “But U.S. companies have their toe in the water, and they’ll eventually figure it out.”

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